TALES OF THE TAPE: MCD, YUM, DRI, KKD, WEN, DRI

Notable news items from the last few days and Friday’s price action.

MCD can serve customers faster because of new methods of preparing food. A machine that dispenses frozen fries into a wire-mesh basket for a deep fry in hot oil has reduced the time taken to about four seconds. Previously, a basket of fries was loaded manually and took two-to-three minutes. MCD announced Friday that the wages of its 6,000 rank-and-file workers will increase by an average of 20%, thanks largely to new machines and work systems that have enhanced productivity.

YUM has opened its first KFC outlet in Zambia.

U.S. food costs will rise 3-4% this year, unchanged from February’s estimate, according to the Department of Agriculture. The increase would be the fastest since 2008.

Robusta coffee may rise 23% to its highest in at least three years because supply from Vietnam, the biggest producer of the coffee bean, will decline as demand from roasters is acclerating, according to F.O. Licht.

DRI highlighted gasoline prices as a significant headwind on its earnings call on Friday.

9. Markit MCDX Index Monitor – The Markit MCDX is a measure of municipal credit default swaps. We believe this index is a useful indicator of pressure in state and local governments. Markit publishes index values daily on four 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. Our index is the average of their four indices. As of Thursday, the most recent data available, spreads hit a new low of 121.8.

10. Baltic Dry Index – The Baltic Dry Index measures international shipping rates of dry bulk cargo, mostly commodities used for industrial production. Higher demand for such goods, as manifested in higher shipping rates, indicates economic expansion. Early in the year, Australian floods and oversupply pressured the Index, driving it down 30%. Since then it has bounced off the lows. Last week it rose slightly, climbing 54 points to 1585.

11. 2-10 Spread– We track the 2-10 spread as a proxy for bank margins. Last week the 2-10 spread widened slightly to 270 bps.

Treasuries were weaker for a seventh day despite significant MACRO headwinds.

TED SPREAD: 22.89 +0.153 (0.672%)

3-MONTH T-BILL YIELD: 0.09%

10-Year: 3.46 from 3.42

YIELD CURVE: 2.67 from 2.70

MACRO DATA POINTS:

8:30 a.m.: Personal spending, est. 0.5%, prior 0.2%

8:30 a.m.: Personal income, est. 0.4%, prior 1.0%

10 a.m.: Pending home sales, est. M/m 0.0%, prior (-2.8%)

10:30 a.m.: Dallas Fed Manufacturing, est. 17.6, prior 17.5

11 a.m.: Export inspections (corn, wheat, soybeans)

11:30 a.m.: U.S. to sell $32b in 3-mo. bills, $30b in 6-mo. bills

12:40 p.m.: Fed’s Lockhart to speak on U.S. economy in Atlanta

1 p.m.: U.S. to sell $35b in 2-year notes

3:40 p.m./4 p.m.: Fed’s Evans speaks in South Carolina

6 p.m.: Fed’s Rosengren speaks in Boston

WHAT TO WATCH:

Libyan rebel forces advance westward with support from NATO air strikes targeting Sirte, Muammar Qaddafi’s hometown hours after the Western alliance agrees to take command of military operations from the U.S.

The highest radiation levels so far at the crippled nuclear Japanese power plant may have come from a meltdown of nuclear fuel

Portuguese President Anibal Cavaco Silva may call early elections for June

COMMODITY/GROWTH EXPECTATION:

CRB: 359.57 +0.30% YTD: +8.04%

Oil: 105.40 -0.19%; YTD: +12.20% (trading +0.48% in the AM)

COPPER: 441.90 -0.12%; YTD: -2.15% (trading -1.66% in the AM)

GOLD: 1,428.75 -0.34%; YTD: -0.18% (trading -0.90% in the AM)

COMMODITY HEADLINES FROM BLOOMBERG:

Rice Planting in Fukushima May Be Abandoned Amid Soil Tainted by Radiation

Cotton Rally Peaking as Record Crop Means First Stockpile Gain Since 2007

Commodities Retreat for Second Day on Japanese Radiation, Merkel's Setback

Oil Drops for a Third Day in New York Following Victories By Libyan Rebels

Aluminum Stockpiles Climb on Two Locations as Demand Rising: Chart of Day

Copper Falls Most in Two Weeks as Japanese Carmakers May Suspend Activity

IM sees VIP revenues continuing to outpace mass revenues and that Galaxy Macau will open in a saturated mass market. The catalysts for mass growth have been muted so far this year--visitation has, more or less, stabilized; infrastructure projects (e.g. Guangzhou-Zhuhai railway line) won't be completed until later this year; and the marketing campaigns of Macau's casinos, with the exception of SJM's 3rd party casinos, haven't reached many destinations beyond Guangdong.

EMPLOYMENT SURVEY FOR DECEMBER 2010 - FEBRUARY 2011 DSEC

The unemployment rate for December 2010 - February 2011 was 2.8%, up by 0.1% point over the previous period (November 2010 - January 2011). Total labor force was 334,000 in the period and the labor force participation rate stood at 71.6%, up by 0.2% point from the previous period. Employment of Hotels, Restaurants & Similar Activities and the Gaming Sector saw an increase.

Pansy Ho will replace Patrick Huen Wing Ming as Stanley Ho Group's representative on the supervisory board of BCP bank starting at the bank's next annual general meeting on April 18. Her term will end in 2013.

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